A securities analyst in Shenzhen said that the construction machinery sector has been plagued by overcapacity, excessive accounts receivable, reduced downstream stimulus from national infrastructure, and an excessively high market inventory of construction machinery. Throughout 2013, the securities firm paid relatively little attention to this sector, and it is estimated that in 2014 the industry will still be in the process of digesting capacity. Although certain niche segments may see year-on-year growth and emerging construction machinery fields will become bright spots, attention to the companies involved will not increase for the time being. Attention could also be paid to individual companies' overseas M&A activities and business transformation, with a suggestion to watch Zoomlion (000157.SZ), which has already taken some transformation actions.

The head of a sales outlet of a listed company in Beijing told Dazhihui News Agency that the excavator segment saw significant growth in 2013, with the industry maintaining a 20% sales increase in the second half of the year and month-on-month growth as well, mainly because the 2012 base was relatively low. However, in the bulldozer segment, sales in Beijing showed a year-on-year decline from October to December. Based on orders, bulldozer sales for the coming year are still not very optimistic, and it is hoped that future large-scale projects in Beijing, such as the South Airport and the Beijing Great Seventh Ring project, can achieve breakthroughs.

Zhan Chunxin, Chairman of Zoomlion, pointed out at the 2013 Global Construction Machinery Industry Conference that the construction machinery industry still has overcapacity on a global scale. In the Chinese market, when domestic GDP growth falls below double digits, the industry's overcapacity becomes severe. Over the past few years, the development speed of China's construction machinery industry has been roughly twice the GDP growth rate. In the future, if GDP growth is at the 7% to 8% level, the industry's development growth will be around 15%. Expanding overseas markets has become an important means of resolving overcapacity in the construction machinery industry.

According to relevant industry reports, Zoomlion hopes that by 2015 its overseas market will account for 30% of the company's total market share. This year the company issued a strategic policy for future development across five major segments: environmental protection, heavy trucks, agricultural machinery, finance, and construction machinery. The new sectors will not rule out the possibility of overseas M&A. The 2015 target is still two years away, and according to the company's 2013 interim report, overseas main business revenue accounted for 6.47% of the total.

In 2013, Zoomlion established an Agricultural Machinery Business Unit and a Heavy Truck Business Unit, among others. On December 28, Zoomlion signed a construction project agreement with Bishan County, Chongqing, and the company's agricultural machinery industrial park will be located in the Bishan Industrial Park. Dazhihui News Agency reached Li Jiangtao, General Manager of Zoomlion's Agricultural Machinery Business Unit, by phone and learned that in the future the company may pursue both domestic and overseas M&A to expand in the agricultural machinery field.

Regarding overseas M&A in the construction machinery field, an investment banking professional said that the current market downturn in the entire construction machinery sector is evident. In the case of overseas M&A, in addition to technology acquisition factors, market factors will be even more important for investors. However, he also noted that expanding into overseas markets is quite difficult.